Penicillin fermentation dregs, municipal sludge and saw dust were used as composting raw material to analyze the effect of antibiotic residue on aerobic composting process in this paper. The variation of such physicochemical parameters as temperature, carbon and nitrogen and the degradation of penicillin were analyzed during the aerobic compost process. The feasibility of composting with fermentation dregs was analyzed using 0.4 m3 volume reactors and the detail compost process were analyzed using five 6 L volume reactor. Results show that the temperature rise rate of co-compost process has an advantage over municipal sludge compost process. The content of total organic carbon (TOC) in mixed material is directly proportional to fermentation dregs, which also decreases with compost time and tends to stable finally. Results also show that the penicillin residue doesn’t affect the TOC varation trend. The water soluble organic carbon (WSOC) and microbial utilization carbon increases with the adding fermentation dregs, which is helpful to microbial transformation and contribute to increase the compost temperature. Adding fermentation dregs is also helpful to reduce the loss of nitrogen and no penicillin residue can be detected on the 5th day of composting process, which shows the resource utilization of fermentation dregs and the degradation of antibiotic residue can be achieved by co-compost process.